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SEBI derivative settlement methodology review

Updated 3 times since CLSTR started tracking revisions of this situation.

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2026-09-12 06:20 UTC → 2026-09-13 07:28 UTC · added removed

The Securities and Exchange Board of India (SEBI) is reviewing the methodology for determining settlement prices for derivative contracts. This follows the August 3, 2026, implementation of the Closing Auction Session (CAS) in the equity cash segment, which replaced the previous volume-weighted average price mechanism with a 20-minute auction to improve price discovery. Market participants, including exchanges, brokers, and investors, have reported increased volatility, particularly on derivatives expiry days. Analysts have noted that sudden price swings during the auction can lead to significant surges in option premiums. For instance, recent sessions saw the Sensex indicative close drop by 2.5 percent, which caused put option premiums to surge between 400 and 500 percent. There are concerns that limited participation during the auction period may allow specific orders to disproportionately influence closing prices, impacting systematic options strategies. While On September 12, SEBI has affirmed that the CAS mechanism issued a consultation paper proposing two primary options to address these concerns. The first is permanent, a ‘Blended VWAP’ methodology, which would incorporate trades from both the regulator is scrutinizing final 30 minutes of the specific formula used to link cash market auction results to derivatives settlement. Continuous Trading Session and the 10-minute CAS. The second option proposes retaining the existing methodology as an interim measure. SEBI intends to refine the calculation of settlement prices rather than rolling back the CAS framework. A consultation paper regarding these proposed changes is expected to be issued, framework, with the a formal proposal slated for discussion during a board meeting scheduled for September 24.

Versions

  1. 2026-09-13 07:28 UTC SEBI derivative settlement methodology review
  2. 2026-09-12 06:20 UTC SEBI derivative settlement methodology review
  3. 2026-09-12 04:37 UTC SEBI derivative settlement methodology review
  4. 2026-09-07 02:27 UTC SEBI derivative settlement methodology review

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